Correlation Between ICICI Bank and KBC Group

Can any of the company-specific risk be diversified away by investing in both ICICI Bank and KBC Group at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ICICI Bank and KBC Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ICICI Bank Limited and KBC Group NV, you can compare the effects of market volatilities on ICICI Bank and KBC Group and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ICICI Bank with a short position of KBC Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICICI Bank and KBC Group.

Diversification Opportunities for ICICI Bank and KBC Group

-0.57

Correlation Coefficient

ICICI Bank  KBC Group

Excellent diversification

The 3 months correlation between ICICI and KBC is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited and KBC Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBC Group NV and ICICI Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ICICI Bank Limited are associated (or correlated) with KBC Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBC Group NV has no effect on the direction of ICICI Bank i.e., ICICI Bank and KBC Group go up and down completely randomly.

Pair Corralation between ICICI Bank and KBC Group

Considering the 90-day investment horizon ICICI Bank is expected to generate 2.01 times less return on investment than KBC Group. But when comparing it to its historical volatility, ICICI Bank Limited is 3.01 times less risky than KBC Group. It trades about 0.05 of its potential returns per unit of risk. KBC Group NV is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,177  in KBC Group NV on October 15, 2024 and sell it today you would earn a total of  1,589  from holding KBC Group NV or generate 25.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	81.62%
Values	Daily Returns

ICICI Bank Limited  vs.  KBC Group NV

ICICI Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICICI Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, ICICI Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

KBC Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KBC Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, KBC Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ICICI Bank and KBC Group

The main advantage of trading using opposite ICICI Bank and KBC Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICICI Bank position performs unexpectedly, KBC Group can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in KBC Group will offset losses from the drop in KBC Group's long position.

The idea behind ICICI Bank Limited and KBC Group NV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.